Tag Archives: economy

Turbulent economic times in Central Asia warn IMF and EBRD

MAY 20 2015 (The Conway Bulletin) – The IMF and the European Bank for Reconstruction and Development (EBRD) both delivered withering assessments of the economies of Central Asia and the South Caucasus, piling pressure on governments across the region.

Not since the global financial crisis of 2008 and 2009 has the region been under such economic strain, the IMF said in its assessment.

“Exchange rate developments, such as the appreciation of the US dollar and the depreciation of the rouble, are compounding the problem,” media quoted Juha Kähkönen, deputy director of the IMF’s Middle East and Central Asia Department, as saying at the presentation of the report in Kazakhstan on May 19.

The region’s average growth rate this year, the IMF said, would slow to 3.3% from 5.3% in 2014.

A collapse in the price of oil and the value of the rouble have knocked economies in Central Asia and the South Caucasus. Currencies have nosedived, losing around a third of their values in only a few months, governments have scrambled to cut budgets and companies have laid off hundreds of workers.

All the data, in short, paints a turbulent portrait of the last few months and an equally troublesome outlook for the next couple of years.

Mr Kähkönen’s statement came only a few days after the EBRD had issued a similar warning at its AGM in Tbilisi. It drew attention to the sharp fall in remittances to the region from Russia and the impact this would have.

“As the Russian economy has declined, remittances from Russia to Central Asia and to eastern Europe and the Caucasus have been declining at an alarming rate,” the bank said in a statement.

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(News report from Issue No. 232, published on May 20 2015)

EBRD downgrades Georgian economic growth rate

MAY 14 2015 (The Conway Bulletin) – At its two-day annual general meeting in Tbilisi this year, the European Bank for Reconstruction and Development downgraded the host nation’s economic growth rate from 4.2% to 2.3% in 2015.

The EBRD’s latest report predicted overall stagnation in 2015 across all its 35 countries in the former Soviet Union and the Middle East. This is mainly due to a drop in oil prices and pressure on currencies generated by a strong US dollar.

Specifically, the EBRD said it had downgraded Georgia’s economic growth prospects because of the stronger than expected impact of the regional financial crisis centred on Russia. This expressed itself in lower remittances from abroad and a heavy drop in the value of national currencies.

Money transfers from abroad in April were down 25% on 2014 and the Georgian lari has also lost 34% of its value against the US dollar since November 2014.

These dreary economy forecasts pile extra pressure on the Georgian Dream coalition government although EBRD president Suma Chakrabarti did have some more comforting words for his hosts.

He said that Georgia was still performing better than average and has the strong potential for economic growth in the future.

“I don’t think it will be too long before Georgia will be able to take advantage of its productive potential going forward and the economic fundamentals here are sound,” he said.

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(News report from Issue No. 232, published on May 20 2015)

Slow price rise in Armenia

MAY 20 2015 (The Conway Bulletin) – Consumer prices in Armenia rose by 5% in the first four months of the year, media reported quoting the National Statistics Agency. This rise represented a steady, but not alarming, price inflation.

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(News report from Issue No. 232, published on May 20 2015)

Kazakh economy to grow at 1.3%

MAY 7 2015 (The Conway Bulletin) – The World Bank said it expects Kazakh GDP to grow by 1.3% this year, a drop of 0.5% on a previous estimate. It said growth rates would rise in 2016 to 2.8% and to 3.9% in 2017. A fall in global oil prices and a drop in the Russian rouble have hit C.Asia.

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(News report from Issue No. 231, published on May 13 2015)

GDP rises in Kyrgyzstan

MAY 12 2015 (The Conway Bulletin) – Kyrgyzstan’s GDP in the first four months of 2015 was about 7% higher than for the same period in 2014, Chinara Turdu- bayeva, head of the state’s statistics committee, told media.

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(News report from Issue No. 231, published on May 13 2015)

Georgia welcomes the EBRD for its AGM

MAY 13 2015 (The Conway Bulletin) – The European Bank for Reconstruction and Development (EBRD) holds its 24th annual meeting and business forum in Tbilisi May 14-15, placing Georgia firmly at the centre of the region’s attention.

Georgia is the first country in the Caucasus to host the annual EBRD meeting. Uzbekistan hosted the event in 2003. The Bank is a major player in Georgia, and has invested a total of $3b over the last 22 years.

This meeting is strategically important for Georgia to demonstrate its economic development, especially now, when the country is mired in a currency crisis. The lari has lost around 32% of its value since November.

Deputy minister of finance Davit Lezhava said the meeting was a perfect opportunity to spread information about Georgia to the outside world.

“I hope that the meeting will result in more investment, greater integration with the democratic world and in more political support,” Mr Lezhava told the Bulletin.

Over $7.2m was spent in preparing the EBRD annual meeting by the private sponsors and the government, media reported.

Mr Lezhava said that he didn’t know how much came from the state’s budget.

“But whatever the governmentcontribution was, it is not a waste of money because we will have great benefits from this event,” he said.

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(News report from Issue No. 231, published on May 13 2015)

Kazakh Central Bank sets up $700m fund for bad mortgages

MAY 13 2015 (The Conway Bulletin) – The Kazakh Central Bank has created a $700m fund to help people pay their mortgages, a move designed to ease Kazakhstan’s mountain of bad consumer debt.

Banks in Kazakhstan have one of the highest ratios of non-performing loans in the world, a legacy of the 2008/9financial crisis. Now, with a new financial crisis linked to the drop in global energy prices and a sharp fall in the performance of the Russian economy, also hitting Kazakhstan’s mortgage holders, policy makers have been looking for ways to ease the burden.

Low-income households are the principal target of the measure, according to official sources. Families at risk will be able to access new credit at advantageous rates, in order to pay off their outstanding bill.

Around 20,000 loans obtained between 2004 and 2009 should be affected by this measure. The largest contribution will go to Kazkommertsbank, which will receive $205m and refinance the debt of 12,500 borrowers.

The rationale is simple. Policymakers have argued that people taking out mortgages between 2004-9 were relatively uneducated in the practise and may have been mis-sold a product or taken out debt that they could not finance.

Most mortgages during this period were also taken out in US dollars. The

Kazakh tenge has dropped markedly against the US dollar since then, making the loans harder to service.

Some analysts, though, have questioned the spirit of the measure.

Quoted on Forbes.kz, financial analyst Murat Temirkhanov said: “The word ‘refinancing’ has little to do with this measure. It should be described as a restructuring, i.e. an exchange of bad loans for cheap money from the state.”

Still, the new measure has the potential to revive the financial market in Kazakhstan.

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(News report from Issue No. 231, published on May 13 2015)

Uzbek President says wants to sell stakes in state companies

MAY 8 2015 (The Conway Bulletin) – In what could be a potential game-changer for Uzbekistan, President Islam Karimov has ordered the government to sell stakes in 68 large companies to strategic foreign investors.

Media quoted a presidential decree which said that stakes in companies such
as Navoiazot, a cement maker, and Turonbank would be up for sale.

“It is time to carry out a full-scale critical analysis of the availability and effectiveness of the presence of state shares in the economy, in other words, ‘the state’s presence in the economy’, and on this basis, to define our actions for a significant increase in the private sector’s presence in the economy,” media quoted Mr Karimov as saying.

It’s unclear from the decree and the media coverage who this apparent relaxation of state controls over Uzbek industry and commerce is actually aimed at.

Western business has generally had a strained relationship with Uzbekistan. There have been a number of instances where Western companies — generally metals companies — have accused Uzbekistan of grabbing their assets.

Instead, Uzbekistan may be thinking of Chinese companies, which have been making in-roads over the past few years, or even businesses from South Korea and India.

Uzbekistan’s economy, like other countries in the region has been struggling to cope with a downturn in global energy prices and a sharp fall in the performance of the Russian economy. Remittances from Russia have dropped considerably.

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(News report from Issue No. 231, published on May 13 2015)

Kyrgyz FDI drops by 37% in first four months of year

MAY 12 2015 (The Conway Bulletin) – The National Statistics Committee of Kyrgyzstan said foreign direct investment (FDI) fell by 37% in the first four months of 2015, figures which highlight the current difficult economic climate.

This marks the second year of decreasing FDI in Kyrgyzstan after a jump in 2013. Most of the loss this year can be attributed to the construction sector, impacted by economic sanctions and crisis in Russia, and to the mining sector, due to the Kumtor gold mine stalemate.

Alex Nice, Central Asia analyst at the Economist Intelligence Unit, said: “Economic and political uncertainty may have depressed foreign investment and of course relatively weak gold prices may also depress new investment in Kumtor, the biggest source of FDI.”

With the fall in remittances from migrant workers abroad and low GDP growth for the next couple of years, Kyrgyzstan needs to improve its business climate in order to attract more, rather than less foreign investors interest.

But as the head of the Association for Foreign Investment, Kairat Itibayev, told media, infrastructure in Kyrgyzstan needs improving.

“Businessmen from Turkey, for example, lament that there is a lack of storage space, unstable electricity, and unusable roads,” he said.

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(News report from Issue No. 231, published on May 13 2015)

Imports drop in Kazakhstan

MAY 13 2015 (The Conway Bulletin) – Kazakhstan imported goods worth 6.3% less in March 2015 compared to March 2014, media reported quoting the Central Bank, further evidence, if it was needed, of the economic stagnation that has hit the region. Exports were down 19.5%.

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(News report from Issue No. 231, published on May 13 2015)